Share

A June 1999 Supreme Court of Oklahoma decision set aside decisions from the Oklahoma Real Estate Commission (the “Commission”) and two lower courts that certain statements contained in an advertising brochure are false and misleading. Snider v. Oklahoma Real Estate Commission.

As part of his advertising efforts, Oklahoma real estate practitioner Kenneth Snider (the “Licensee”) used a pamphlet published by the Buyer’s Agent, Inc., entitled “The Buyer’s Agent” (the “Brochure”). The Commission questioned several statements contained in the Brochure which it thought might be false or misleading, in violation of the Oklahoma Real Estate License Code.1 One statement was that buyer’s agents saved buyers thousands of dollars (the “Savings Statement”). The other was a warning about other types of brokerage relationships between licensees and consumers: “Beware of any [licensee] who mentions the words ‘dual agent,’ ‘assigned agent,’ ‘contract broker,’ ‘facilitator,’ ‘transaction broker,’ or ‘designated agent.’ These are all methods of conducting real estate transactions which give the buyers less than full representation” (the “Warning Statement”).

The Commission notified the Licensee that it was initiating a formal investigation, and in a letter to his attorney, listed the specific portions of the Brochure it considered problematic. The Warning Statement was not specified. At the hearing, the Licensee produced signed statements from purchasers affirming that they had saved the amounts described in the Brochure. The hearing examiner found the Savings Statement was not false or misleading.2

No evidence was presented by the Commission at the hearing to indicate that the claims in the Warning Statement are false or misleading. The hearing examiner simply concluded that the statement is false and misleading on its face because it indicates that in the other types of brokerage relationships listed, purchasers always receive less than full representation from the practitioners. The Licensee filed an exception with the Commission, claiming that based upon the complaint it filed against him, the Warning Statement was not one of the issues which would be investigated. Nonetheless, the Commission ordered his reprimand and a $200.00 fine.

The Licensee appealed the order to the district court, which upheld it. He then appealed to the Court of Civil Appeals, which also affirmed the Commission decision. On appeal to the Oklahoma Supreme Court, the court stated that the Commission, as well as both lower courts erred. To be affirmed, an administrative agency order must be supported by substantial evidence. Here, as far as the Warning Statement, no evidence was presented by the Commission; it simply adopted the hearing examiner’s report that the statement is false and misleading on its face.

The Commission argued that the issue of whether the Warning Statement is misleading “is a question to be determined by the Commissioners in the exercise of their expertise.” The court, obviously annoyed, responded that “The Commission, however, gives no reason why its expertise in real estate matters should be upheld when its finding is supported by merely a bald statement that the advertising is false and misleading on its face.” It also stated that “Agency law is not an area in which the Commission can claim expertise superior to the courts of Oklahoma.”

The court further observed that the Brochure as a whole explains that a licensee acting as an agent for the seller, or a licensee acting as a dual agent - representing both the seller and the purchaser in the same transaction - cannot fully represent the purchaser. The court found nothing false or misleading about that truthful conclusion. The court also noted that dual representation, with proper disclosure by the licensees and with the consent of all parties, is lawful in Oklahoma.

The court held that the Warning Statement is not false or misleading. “Sellers’ agents and dual agents do not and cannot by law give a buyer the same degree of loyalty as an agent who acts on behalf of a buyer... A buyer who relies on the seller’s agent or on a dual agency does not receive the same degree of legal protection as that afforded by an agent acting solely on behalf of the buyer.” Accordingly, the court set aside the Commission's order and the decisions of the two lower courts that had affirmed it.

NAR’s Code of Ethics (Article 12) requires REALTORS® to be careful at all times to present a true picture in their advertising and representations to the public. The intent of this Article is to prohibit advertising that is objectively untrue or deceptive. However, if a REALTOR®’s advertising presents a “true picture,” then that REALTOR® cannot be found in violation of the Code of Ethics, even if such ads are unpopular with competitors.

NAR’s Standard of Practice 1-4 states that “REALTORS®, when seeking to become a buyer/tenant representative, shall not mislead buyers or tenants as to savings or other benefits that might be realized through use of the REALTOR®’s services.” Non-misleading claims of savings that can be substantiated are not prohibited by NAR’s Code of Ethics. For additional guidance, see NAR’s case interpretation #1-23.